THE Abbott Coalition government’s repeal of the minerals resource rent tax marks the end of an unfortunate chapter in Australia’s political and economic life.
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Few will lament the tax in the form it ultimately took, but many may regret the lost opportunity to put in place what could and should have been a valuable addition to the armoury of national revenue-raising measures.
It was the Rudd Labor government that first proposed a ‘‘super profits tax’’ on some parts of the mining sector. The idea had its genesis in the treasury department, where the nation’s top publicly employed economists promoted it for two key reasons.
The first aim of the tax was to increase the taxpayer’s share of the massive boomtime profits that were being made from resources that belonged to the entire country.
The second goal – less openly discussed – was to apply a degree of braking to the unrestrained expansion of the resources industry during the boom by diminishing the flow of pure profit to the mostly foreign-owned giants that dominate the industry.
Australians were repeatedly warned that the emergence of what was then termed a ‘‘two-speed economy’’ was likely to presage the onset of so-called ‘‘Dutch disease’’. This economic ailment is characterised by a big expansion in the resources sector, followed by a hike in the value of the nation’s currency and a bidding up in price of productive inputs, including labour, disadvantaging non-mining economic sectors.
Few, however, heeded these warnings at the time, and a successful scare campaign by the mining giants – culminating in a $15million advertising campaign against prime minister Rudd – was credited with bringing about a change in the nation’s leadership and accelerating the swing to Coalition rule.
Kevin Rudd’s successor, Julia Gillard, negotiated the widely derided replacement MRRT as a sop to the angry mining companies. The new tax arrived after the boom and failed to deliver much of the benefit the tax was originally designed to bring.
The Abbott government, having promised to axe even this shell of a tax, has now delivered the goods for the resource companies, striking a deal with minor parties in the senate.
The drop in budget revenue will be offset by deferring a promised increase in the superannuation guarantee until 2021, making the tax repeal a double win for big business.
Some may agree with Opposition Leader Bill Shorten, who accused the government of ‘‘putting the interests of 10 mining companies ahead of nine million Australians’’.
The truth is that neither of the major parties proved capable of acting courageously in the national interest on this key issue of public policy.
